Tag Archive | "View From the Top"

An Interview with Vernon Leake

In July 2012, Century Automotive Service Corp. was purchased by Mapfre Assistance USA Inc., the U.S. division of Mapfre Group. Century now operates as a wholly-owned subsidiary to Mapfre, which has 34,000 employees, operating in 46 countries.

For Vernon Leake, CEO of Century, the decision to go this direction was a sound one. “In the industry, I think companies are looked at in three ways: as factory; as insurance companies that own and back their own obligor company; or as true third party admins that purchase insurance from insurance companies. We did this so the obligor admin and insurance would be owned by the same company; we can now provide financial strength to clients and agents by having the same company own both admin obligor company and insurance company.”

Leake has been in the industry for more than 20 years, in a variety of different roles, from provider to independent agent. He noted that he has always prided himself on the flexibility of the company – he sees this recent acquisition as an extension of that, giving Century even more options.

For now, he noted, the company will remain “Century Automotive,” with a formal announcement coming later this year, with a full advertising and branding campaign touting the new ownership and the advantages it will bring. They have waited until now because, Leake noted, they wanted to make sure they were ready. “We are expanding and growing faster than we can handle right now, so we’re making sure we’re fully prepared for a formal announcement to the market,” he said. “Prior to now, we mostly used an internal sales force, with some agents. The real growth, after the formal announcement, will be in the agent market. That will be the push.
We will still have growth in other areas, but the extreme growth will come through agent partners.”

How did this partnership happen? “It was the right place at the right time,” Leake said. “We did business with one of their affiliates, and through that existing business relationship we ended up engaging in conversations. We had been approached by several industry and private equity companies before, because we had been growing at 25-40 percent a year. We didn’t find the fit with some of the others, but Mapfre said ‘we have insurance and you have experience and a great agent network, and we want your experience and network, and we’ll provide capital and insurance backing.’”

Mapfre, he noted, didn’t have a warranty presence in the United States yet, and was looking for someone to partner with. Century wanted more multinational exposure, so, Leake noted, “we matched our experience with their A-rated insurance.”

Looking Forward
Beyond the scale that being a part of Mapfre brings to Century, it will better position the company to address several trends Leake is watching. The first of those, he noted, is that the manufacturer is becoming a bigger player in the warranty space, and they are getting more aggressive about marketing their products.

“They have shown a greater interest in being in the captive insurance and participation programs for dealers,” Leake said. “In the past, manufacturers were less interested in sharing those profits with dealer clients, but the market has gotten more aggressive and demand from the franchise dealer for participation has driven manufacturers into being a competitor with providers.”

Leake is also keeping a close eye on the legal and regulatory environment surrounding his products. “The regulatory environment continues to get more strict and well enforced,” he noted, “which is good for us, but makes it a more difficult environment.” He believes the scrutiny of F&I products will only continue to get more intense, and providers need to be ready for it. This is another area he feels being part of a larger company will be a big advantage for Century moving forward.

For the future, Leake had a few pieces of advice for all agents. “Choose a partner that’s a one-stop show, one who is flexible and can provide a complete turnkey solution,” he said. “But make sure your partner is well-backed and all the pieces are affiliates. Make sure there’s a common thread to ensure long-term financial stability. Obligors can become insolvent, carriers can go out of business, and that puts agent in a real position.”

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An Interview with Matt Briggs

While there are signs that the economy is starting to pick back up, there is no denying that the last few years have been painful in many ways. Not only did dealers, agents and providers all face hard times, the consumers who purchase their products did as well. And that led to credit scores taking a hit – today, those consumers are starting to invest in cars and products again, but many are now less than prime.

Matt Briggs, co-founder and CEO, Credit Jeeves, is looking to give dealers a new tool to help get those customers with damaged credit scores back in the door. His service aims to help them take action to improve their scores, and then drive them back to the dealership to purchase.

“My vision for Credit Jeeves is to turn the everyday adverse events of credit turn-downs, or offering less than favorable terms, that happens every day at dealers into endless opportunity for the dealership,” said Briggs. “In addition, we help consumers understand exactly what is affecting their credit score, keep them connected to their dealer, and let them know when they’re ready to buy the car of their dreams. Our product closes the loop for credit-challenged consumers and ultimately helps dealers sell more cars.”

How it works is simple. An agent signs a dealer up to enroll in the program, with no up-front costs. When a consumer is in the dealership trying to buy, and their credit comes back with less favorable terms, rather than letting them walk out the door, the dealership can offer to enroll them in Credit Jeeves. The consumer pays nothing for it, and it gives them a detailed report of what may or may not be affecting their credit score. But more than that, it gives the consumer specific, actionable items to bring that score up. The dealership, when signing them up, sets the target score, and the entire program is built around helping the consumer reach that level.

Once the target score is reached, the dealership will receive a notice that the consumer will now qualify for the loan they were interested in – giving the dealership a real, solid lead to follow up on. For the consumer, the entire process is free. For the dealership, the cost comes when the lead is generated, after the consumer has reached the target credit score.

But does it work? “The average enrollment has increased their score more than 40 points, and most of those within the first 30 days,” said Briggs. “We are able to convert about 10 percent of people who were completely turned down for credit. For the average dealer, that’s about 10 more deals per month.”

He pointed out that in one FTC study, one in four consumers had errors on their credit report, with a negative impact on their score. He also noted that studies have shown that, in the auto industry, roughly 50 percent of buyers have less than average credit. Right now, he said, dealers just have to let those consumers walk out the door. And he believes it will only get more difficult, not less, with the prospect of more government oversight of the auto loan industry. But beyond just the score itself, he also believes that more consumers will seek to do business with dealers they feel take the time to establish a relationship. They don’t just want to be another face, forgotten as soon as the next deal comes along. Briggs believes that giving dealers an option to help consumers overcome credit challenges will help on both fronts.

He noted that most consumers who are denied credit either don’t know why, or don’t understand how each piece of the puzzle is connected. He sees Credit Jeeves as a way for dealers to increase revenue with pre-qualified consumers who have already expressed interest in buying that specific car, but also as a way for them to build a partnership with those consumers. “We believe credit optimization should be goal driven. By establishing specific goals consumers can take action every day towards buying a car. Just because someone is credit challenged today doesn’t mean they can’t be credit ready tomorrow.”

He continued, “Providing credit transparency and education removes the mystery for consumers on why they were denied and more importantly provides a potential path for consumers to do something about it and ultimately return to buy a car.”

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An Interview with Christina Schrank

At Agent Summit this past March in Las Vegas, Tariq Kamal sat down with Christina Schrank, president of NAC. They talked about the show, the company, and what’s on the horizon for NAC. The goal, she noted, is to provide the best service to agents, in every way possible. You don’t want to miss watching the full video!

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An Interview with Jay Lighter

Jay Lighter, president of NitroFill Inc., is passionate about the service drive, and its potential to increase the bottom line for the dealer. He sees the F&I department as the pivot point for that process, and is currently looking for agents to help him get the message to dealers.

Traditionally, filling tires with nitrogen, and then putting the program in place to bring customers back on a regular basis to check the pressure, has been the realm of the service department alone. It was sold through that channel, capturing only a percentage of customers who came to the service department for an unrelated maintenance or repair need. However, Lighter sees the product, and benefits, as being a bigger product.

Today, he uses more than 80 agents — but only 10 of those are in F&I, and he would like to see that change. He sees the F&I department as the biggest single growth space for both his product and for dealers, and he wants to educate those dealers on the benefits of a nitrogen plan. By selling consumers on the option while they’re in F&I, he believes, it will be an increase in sales for everyone — and will bring those customers back regularly to the dealership service department, with an opportunity to cross-sell additional service services.

“Every owner’s manual of every vehicle sold in this country encourages customers to check their tire pressure every month; it is a stance also taken by every tire manufacturer and the federal government, and further promoted in the media whenever vehicle safety or fuel economy are discussed. Tire inflation maintenance is the greatest traffic builder of our time.”

The problem, Lighter noted, is that in the past, customers came in to the service departments regularly for their oil changes. The dealership then had the opportunity to convert them to other services such as tire rotations, wheel balancing, alignments or new wiper blades. Today, he said, engine and lubrication technology have turned quarterly oil changes into something that can be done, at most, once or twice a year.

To combat that, he is pushing dealers to use tire inflation maintenance as a way to get customers into the service drive. And by selling it as part of the F&I package, it doesn’t rely on getting customers in to the service department the first time for something else. It captures that customer at the point of sale, and gives them a reason to continue their relationship with that dealer from day one.

His company sends out reminders to the consumer on behalf of the dealership once they sign on to the program, and he points out that the average U.S. consumer visits their car care professional 1.2 times per year; the average NitroFill customer, however, visits their dealer up to 4.5 times annually. It’s also the only F&I product, he said, that is almost purely a customer retention tool. “No other F&I product does this,” he said. “Typically you sell it, and it goes away unless they have a claim. It’s mostly an insurance product — if you damage a tire or wheel we’ll replace it. We do have some of those components, but we tag that along with a product that we install in the car that will give benefits and great retention tool. We are very unique in the F&I space, and that’s where we see our growth, through agents.”

His company does offer packages that the dealer can customize, from roadside assistance to full tire & wheel packages, but rather than making nitrogen a ride-along, he makes that the primary product, and the rest are additions to give the customer and dealer more options. But at its heart, he sees their tire inflation maintenance program as the main selling point.

“Before the collapse of our economy a few years ago, converting the industry to nitrogen inflation was a hot topic. However, after the fall, priorities changed. But it’s coming, because it just makes sense.” Lighter said.

In addition to bringing customers in to the dealership more frequently, he notes that the use of nitrogen also has other benefits, such as no oxidation, meaning no rim rust or corrosion, and no tire rot, among others. He pointed out that it also means tires stay inflated to their optimum level for longer, meaning better fuel economy and less chance of tire failure. So it becomes not only a win for the dealership, that can strengthen it’s ties to the consumer and have the opportunity to offer additional services on a more regular basis, but it’s a win for the consumer, who sees a wide range of benefits.

And it’s a win for agents, who have a new tool to add to their lineup to help F&I managers frame the conversation around immediate customer benefits, instead of costs or programs that may or may not be needed in the lifetime of that vehicle sale.

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An Interview with Rick Kurtz

Rick Kurtz, senior vice president, dealer services, for Protective Asset Protection, has been serving the automotive industry for the past 23 years. He’s seen a lot of ups and downs, but the last five years have been a particularly challenging time.

He noted that, for providers, there have been a lot of lessons to learn. “Through the years, the automotive market has yielded many lessons, some tougher than others, but all valuable. Stair-step incentives, relaxed lending practices, F&I pricing models based upon unsustainable trends, and irrational ‘lifetime’ product pricing and guarantees are potential pitfalls for those choosing to ignore the implications of similar actions over the past decades.”

One of those items to keep in mind is compliance. While it has always been a factor in both the F&I space and in dealerships in general, it has been ramped up, Kurtz noted. More legislation has been enacted to protect consumers, which has led to everyone in the cycle needing to be aware of the new rules and regulations, and what part they play in enforcing them. “Providers, agents and dealers have responded by leveraging new technology to standardize processes and ensure compliance with state and federal requirements. This ultimately benefits the consumer by ensuring that every consumer will understand the products being offered and be in a position to make an informed decision.”

Looking ahead, Kurtz doesn’t see this trend going anywhere anytime soon. In fact, he expects that the Consumer Finance Protection Bureau will continue to grow in both size and scope, and that compliance will remain a top concern for everyone in the industry. He sees it as potentially even limiting choice, in the long run, as more regulations and requirements force some providers out of the market, or inspire lenders or OEMs to offer competing products themselves. “In the next five years, I would not be surprised to see OEM’s and major lenders exert pressure on dealers to sell factory or lender-branded products. Fewer options for dealers and consumers could be an unfortunate outcome for the market.”

Beyond compliance issues, Kurtz sees manufacturer-mandated facility improvements and the ability to attract and retain quality employees in the dealer space as prime concerns. It might be more on the dealer side of the equation, but he believes providers need to be aware of those challenges as well.

And providers, he noted have a part to play. He believes it is still a very rich industry with a lot of opportunities, for those who are willing to embrace it. “The auto retailing industry is a wealth of opportunity for anyone willing to work hard, network, and make the commitment to become a student of our business. This industry affords a vast variety of career paths including: dealership sales, dealership management, or more entrepreneurial options such as dealer, or general agent, plus corporate opportunities with OEM’s, lenders or a company like Protective.”

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An Interview with Bob Corbin

Bob Corbin is the president and CEO of Innovative Aftermarket Systems (IAS), and he sat down with us for this month’s View from the Top. Corbin said that the company’s mission has been the same since it was founded in 1984: to provide practical aftermarket programs and high-quality administration and claims. One of its first products, and one that remains a key part of its offerings, is its menu software. As a company, IAS targets both agents and large dealerships for its client base, selling the products under its own brand, as well as private labeling some of its most popular offerings.

Because it has been around for a while, IAS has a great vantage point to look at where the industry has been and where it’s going. Corbin noted that, because of that perspective, he sees change itself as the biggest issue facing the industry today. “Dealerships are facing an enormous amount of change from adopting new technologies to regulations to the type of consumers they are selling to — as the adage goes, ‘The only thing that stays the same is change,'” he said.

Corbin went on to note that, “The last five years have been a wild ride in the car business. After taking a hit a few years ago, the industry is on its way back and I think technology and compliance will continue to shape our industry.” Corbin believes that ever-advancing technology has most of the industry and the major players taking notice, and IAS is no different. It has impacted every aspect of the industry, from the vehicles themselves, to the way they’re sold, to the products available in the F&I office.

“The advances in technology over the last decade in the car business are staggering,” Corbin said. “Many dealers are still working toward their goal of becoming paperless. They are now selling to pure Internet customers and have found a way to utilize tablet devices in their presentations. In addition, technology is being utilized as an excellent tool to overcome the ever-changing compliance issues facing dealers in F&I transactions.”

Those advances have done more than just add a lot of fancy gadgets, or move the industry away from paper. They’ve also brought a higher degree of compliance to various regulations — and helped F&I become a more profitable sector overall. “The last five years have produced technology advances that have made F&I more compliant and efficient and also more profitable,” said Corbin.

One example? “Twenty years ago, there was no electronic menu and now a large percentage of dealerships not only use them but have seen profits grow substantially because of them. I see that happening with Internet sales as they continue to increase in frequency in our industry. Dealers will, of course, still sell cars, but what about F&I products? As an industry, we have to figure out how to adapt to this new breed of customer and find a way to successfully sell F&I products,” Corbin said.

The Internet in particular is one area where Corbin believes the most change will come. He noted that, as those Internet sales increase, consumers won’t buy products they aren’t offered, so F&I managers and agents will have to find better ways to present and sell using the newer technologies. “Over the last five years we’ve finally seen the emergence of eRating and eContracting of warranty products across the country. And in the last two years we are seeing more and more dealers embrace and even ask for this functionality,” he noted. “Also with more and more customers shopping online we have seen the emergence of technology offerings which aim to sell products to this new class of customer.”

In terms of specific hardware technology he sees shaping the industry, Corbin noted that he would not be surprised if most, if not all, dealerships will have adopted tablets by the end of 2014. “Over the next few years it’s clear that younger customers and employees will drive dealers to utilize more and more tablet technology. Solutions already exist for almost every area and process in a dealership, although adoption of this technology is just starting.”

Why does he target that technology in particular? Because it allows the sales team to interact more directly with consumers during the selling process, allowing them to make better, stronger connections. In addition, he noted, anyone under 30 has grown up with the Internet as simply a way of life. “These individuals shop, buy, converse and decide in an entirely different way than previous generations.”

So with all the changes, what does he recommend to agents who are looking to break into the industry? “Professionalism, a positive attitude and strong work ethic are essential to success,” he said. “As the industry is poised for a comeback, there is a lot of noise and distractions. Therefore, the ability to deliver high-impact, innovative products will set you apart from the pack. Partnering with the right administrator and underwriter is crucial to achieving these goals.”

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